Of
non-profit organizations that sponsor 403(b) retirement plans, 60% are
reviewing and evaluating the investment options in their plans themselves,
according to the latest 403(b) Snapshot Survey from the Plan Sponsor Council of
America (PSCA) and sponsored by the Principal Financial Group.
That
number falls to just 40% for sponsors of small plans (1 to 49 participants).
However,
64% of large plans (1,000 or more participants) are receiving assistance from
investment consultants, compared to 41% of plans of all sizes. This percentage
drops off sharply for small plans, with just 18% engaging a consultant to help
review and evaluate plan investments. Additionally, more than 30% of all respondents
state their plan service provider reviews their mutual funds, and nearly 9% say
no one does. That total jumps to 16% among small plans.
While
the overall findings are encouraging, Hattie Greenan, PSCA’s director of
research and communications, says “small not-for-profits look like they could
use some support, with fewer than half evaluating funds themselves and very few
using an investment consultant.”
The
survey also found a high percentage of plans not conducting requests for
proposals (RFPs) to help ensure their plan fees are reasonable. Forty-two
percent of plans do not conduct periodic RFPs. Among the smallest plans, the
percentage increases to 64%.
“This
data point, along with many others in the survey, illustrates how small plans
are underserved by financial advisers and could benefit greatly from their expertise,” says Aaron Friedman, national tax-exempt practice leader
at The Principal.
NEXT: Fund benchmarking, investment education
and advice
A
majority of plans (86%) indicate they benchmark their funds. The most popular
elements used in benchmarking include performance (84%), fees (69%) and risk
(64%).
More
than 40% of plans have not replaced any funds in the last two years, including
two-thirds of small organizations.
According
to the survey, plan sponsors rely heavily on their providers to deliver
investment information to participants. More than half of sponsors indicate
their plan provider helps participants make investment decisions, and 30% use
an investment consultant to do so.
Fifty-five
percent of 403(b) plan sponsors make a financial planner available to
participants, and 49% make advice available.
PSCA’s
2015 403(b) Snapshot Survey reflects responses from 426 not-for-profit
organizations that currently sponsor a 403(b) plan. Seventeen percent of
respondents sponsor 403(b) plans that are not subject to Employee Retirement Income
Security Act (ERISA) fiduciary duties.
Partners Group introduces private markets funds for the defined contribution market; Allianz Global Investors launches dynamic target-date collective investment trust series; and more.
Bennett Lawrence
Management LLC, known for small- and mid-cap U.S. growth investment
products, will join the Delaware Investments stable of boutique equity
investment
teams.
Alex Ely will lead the firm’s seventh boutique equity investment
team following anticipated closing of the deal in the first quarter of 2016,
according to Delaware Investments. Bennett Lawrence Management currently manages
more than $330 million.
Bennett Lawrence is based in New York and was founded in
1995 by Van Schreiber and Jane Fisher to serve both institutional and
individual investors. Schreiber will join Delaware Investments as a senior
portfolio manager, serving the firm’s all-cap growth clients, while Fisher will
serve as the team’s investment specialist. Ely will lead the investment team as
chief investment officer.
Other members of the team include Senior Equity Analysts
Dina Pliotis and Nate Mahrer, and Equity Analysts Amy Zhang and Traver
Davis. Ely will serve as co-portfolio manager on the all-cap growth
strategy and continue to manage the small- and mid-cap growth strategies.
Upon the close of this acquisition, Delaware Investments
will offer separate accounts and asset management through sub-advisory
relationships in the small and mid-cap growth space.
NEXT: New Private Equity
Funds from Partners Group
Partners Group Adds
to Private Market Offerings
Partners Group, the global private markets investment
manager, has developed new private markets offerings for the world's three
largest defined contribution (DC) markets—the U.S., U.K. and Australia.
Steffen Meister, president of Partners Group, suggests the
move is a “milestone in the development of suitable private equity and private
markets offerings for the DC market.”
The offerings are already available to U.S. clients,
according to the firm, while the Australian fund “is in ramp-up phase and is
expected to open for client commitments in early 2016. The U.K. fund is in the
final stages of regulatory review and is expected to launch in Q1 2016,” the
firm says.
André Frei, partner and co-CEO of Partners Group, explains
that DC plans have historically been unable to invest in private equity and
private markets due to the illiquid structure of traditional private equity
vehicles. “These funds will change the status quo,” he predicts.
Partners Group's three offerings provide access to private
markets investments, while at the same time providing daily liquidity and
pricing and fulfilling the highly standardized purchase and redemption
procedures that are requirements of the DC system. They are designed to be
adopted by professionally-managed or advised DC plans and incorporated in
structures such as target-date funds in the U.S., default funds of work-place
pension plans in the U.K., and retail platforms in Australia.
Frei adds: "As the proportion of pension assets invested
in DC versus DB schemes has risen, so have the demands from consultants and
plan managers for access to a more sophisticated set of investment options,
including private markets. Given this demand-led momentum, we anticipate that,
over the next decade, private markets will become as important a performance
driver for DC schemes as they are today for many DB portfolios."
NEXT: TDF CITs from
Allianz Global Investors
New Line of Dynamic CITs
from Allianz Global Investors
Allianz Global
Investors U.S. LLC announced the launch of AllianzGI Dynamic Target-Date Collective
Investment Trust (CIT) series maintained by Reliance Trust Co. The new CIT
series will utilize the asset allocation and risk mitigation strategy Allianz
Global Investors developed in Europe in 2005.
Calling the CITs
“innovative” and “unique,” Allianz says they address the disconnect, or “risk
gap,” behavioral finance studies have shown often exists between a plan
sponsor’s optimal retirement target-date glide path and the risk tolerance
levels of plan participants. The goal of the funds, therefore, is to provide
downside protection while maintaining long-term return potential.
According to
Allianz, the Dynamic Target-Date CITs, similar to a target-date fund, offer a
strategic glide path that reallocates portfolios over time as the retirement
target date approaches. The funds also implement risk mitigation features through
which the managers can deviate from the glide path to reflect market
conditions. This means the portfolio can overweight return-generating asset
classes during sustained bull markets while also employing greater risk
mitigation into defensive asset classes during market downturns throughout the
life of the glide path. The CIT series also utilizes a focus on smart-beta and
index-based strategies to keep costs competitive.
The CITs’
multi-asset management strategy is new in the U.S. and, Glenn Dial, head
of U.S. retirement strategy for AllianzGI, says it could “revolutionize the target-date
landscape.” It has demonstrated consistent success, the company says, in
outperforming respective benchmarks in both favorable and adverse market
environments, particularly showing significant protection during the 2008/2009
global financial crisis.
Reliance Trust Co., trustee,
established the CIT series and handles its ongoing operation. Allianz Global
Investors U.S. LLC serves as the investment adviser to Reliance Trust; State
Street Bank and Trust Co. is custodian and accountant for the new AllianzGI
Dynamic Target-Date CITs. Participation in the CITs is limited to
tax-qualified pension and profit-sharing plans and related trusts, as well as
governmental plans, as described in the company’s declaration of trust.
NEXT: New e-Book from
Guidance Point
New e-Book from
Guidance Point
Guidance Point Retirement Services recently published an
e-book for retirement plan officials based on the Securities and Exchange
Commission (SEC) amendments to money market mutual fund rules that are intended to
increase transparency and give investors additional protection.
The e-book discusses recent amendments to money market
mutual fund rules and the likely impacts on retirement plans and plan
sponsors. Generally, the firm says, plan sponsors spend very little time “analyzing
the money market or cash type of investment option as highlighted by the Employee Retirement Income Security Act (ERISA) and
the structural benefits and deficiencies of differing types.”
“The $2.73 trillion money market fund market has recently
undergone reforms that may impact their investment strategy and use within the
defined contribution setting,” the firm warns. “Our e-Book works through a
process for plan sponsors to understand recent changes to money market mutual
funds, and evaluation of alternatives such as Bank Savings Accounts and Stable
Value alternatives.”
Investment advisory
firm Slocum has adopted RiskFirst’s real-time analytics and reporting
platform, PFaroe.
The investment advisory firm serves more than 125
institutional clients with total invested client assets of
approximately $120 billion and will use PFaroe “to help inform strategic
asset allocation decisions and implement dynamic de-risking strategies.”
Nicole Delahanty, principal at Slocum, says the firm always
strives to take a “big picture or qualitative view of the market when setting
long-term asset allocation strategy for our retirement plan clients. But a
dynamic pension landscape also calls for the ability to view pension risk on a
frequent basis—we need to stress-test our views and ensure that they meet the
needs of our clients from a funded status, cash and expense perspective.”
Matthew Seymour, managing director at RiskFirst, suggest it’s
“clear that de-risking is swiftly moving up the agenda for U.S. pension plans,
large and small, and we are delighted that the industry is turning to real-time
analytics to improve efficiency and effectiveness of such solutions. Slocum is
a firm that takes a highly customized approach to developing asset allocation
and risk management for clients, which marries perfectly with PFaroe’s holistic
and flexible approach.”